The EU, China response to populism: more free trade

China and the EU are responding to threats to free trade and the liberal world order with renewed efforts to promote business and cultural links between the two continents.

The Friends of Europe EU-China Annual Forum took place in the wake of populist votes in the US and the UK that will directly challenge structures and initiatives that aim to promote free trade. The forum, held on 27 June, and a roundtable, the previous day, were subtitled “Cooperation in an age of uncertainty”.

The new US President, Donald Trump, was elected after a campaign featuring aggressive protectionist rhetoric, and has decided to pull out of the Trans-Pacific Partnership (TPP). The Brexit vote will likely reduce the size of the world’s biggest free trade bloc. However, Chinese President Xi Jinping has underlined that “no one will emerge as a winner in a trade war”. And, following Trump’s decision to withdraw from the 2015 Paris Agreement on climate change, EU and Chinese leaders have reaffirmed their commitment to implement the agreement.

“At a time when countries around the world are facing up to some very hard truths and have to take difficult decisions, China and the EU are steadfast and persistent in choosing the right options,” said Yang Yanyi, Ambassador and Head of Mission of China to the EU. Notably, the two sides are focusing on an open world economy, improved trade and investment structures and people-to-people exchanges, she said. “We are joining hands and rising to the challenges. Both China and the EU are of the view that we have both a great opportunity and a great responsibility to cooperate and work together.”

The trading relationship between Europe and China is vital for both economies. The EU is the biggest destination for Chinese exports and outward investment, while China is the EU’s second largest export market after the US.

“These relations are a major source of wealth, jobs and development for both sides,” said Cecilia Malmström, EU Commissioner for Trade. “Millions of Chinese came out of poverty thanks to trade, and now they are tourists visiting our countries.” However, she added that the EU’s big, systemic trade deficit with China indicated a disparity of treatment of companies in China and non-tariff barriers. “So, the first objective of a trade relationship would be to bring barriers down” in areas ranging from European milk and beef exports to the freedom for European telecoms companies to operate in China.

One concrete way that China is trying to boost trade with Europe is the Belt and Road Initiative (BRI), a blueprint for deeper connectivity across Europe and Asia. The belt will be overland connections, especially rail, while the road refers to maritime links between Chinese and European ports. Better and faster transport connections will increase trade and investment flows.

“We need to promote free trade into Asia, so Asia-Europe cooperation will be important for implementation,” said Chi Fulin, President of the China Institute for Reform and Development (CIRD). “One Belt One Road will also have complementary effects. It is needed to upgrade China’s consumption structure.”

The initiative will be a source of economic activity for countries in central and southern Asia lying on the routes, as well as for Europe and China. “Eurasian connectivity is not an end in itself,” said Hans-Dietmar Schweisgut, Ambassador of the European Union to the People’s Republic of China. “It must deliver concrete benefits to our citizens and to the poorer parts of the world. It is a great ambition – indeed at the level of a truly strategic partnership between the European Union and China. But in times of geopolitical unpredictability, it may well be the only way forward.”